Finance

Brexit spurs on EU-Japan trade deal

In light of Brexit global markets are fearing the effects it could have on their ability to trade. This has led to a renewed effort by Japan to negotiate a trade deal with the EU that would provide access to the single market.

Traditionally almost a third of Japanese investment in the EU was through Britain. Yet with Brexit Japan wants to act swiftly in order to negotiate a trade deal with the Community to have access to the single market. EU officials have sat down to negotiate the trade deal with Japan 16 times before, and are scheduled for a 17th round of negotiations on the week starting the 26th September 2016 – this again does also show how lengthy Brexit negotiations will take place. EU officials are similarly keen to conclude negotiations with Japan as they are the third largest economy in the world.

Although the deal that the EU will offer Japan is dependent upon Brexit argued Petr Jezek, the head of European Parliament’s delegation to Japan. Japanese companies have already heavily invested in Britain to export cars and other industrial goods. However with the potential of a ‘hard Brexit’ with Britain looking towards World Trade Organisation options. Japan fears this and has publicly stated that it is willing to rethink its relationship with the Community and Britain regarding car exports. Yet if Britain does retain easy access to the single market then Japan would not have to rethink its Community strategy.

Previous trade negotiations have been stalled due to Japan’s refusal to open access to its food markets argued EU officials at the end of last year. Japan has little to no interest in this area, however food markets were meant to provide a point of discussion that could allow negotiations for car exports to be resolved. In recent years of negotiations Japan has wanted the Community to fully remove truck and car tariffs if a deal was to be agreed. The Community has traditionally opposed this but are now willing to show that there is room for a compromise. Japan also has wanted to remove almost 80% of duties of auto-parts. The EU however, still opposed this as they wish to keep the levies in place for another 10 years due to competition between member states and Japan’s markets.

While for the Community they have wanted to focus on having access to public works and various rail projects as well as procurement in general. The Community has repeatedly pushed for municipal contacts – although Japan has stated that could take a long time to come to an agreement on municipalities. Moreover from January 2016 Japan had suggested trade with the Community as they wanted to procure safety equipment form the Community. But even this could not be agreed which had left Japan’s infrastructure and transport ministry as well as the Community frustrated.

However, in the last week of September 2016 Japan showed its willingness to negotiate with the Community as they sent senior diplomats to reach an agreement. A specific agreement was reached on date privacy and data flows. This was the first real agreement that had been made with Japan post Brexit. The ease in which this did occur again illustrates Japan’s willingness to negotiate in order to safeguard access to the single market.

Japan had in recent years been gearing its foreign and financial policy towards a Trans – Pacific Partnership deal. This was a deal between 12 Pacific Rim nations that included the United States. However with the dynamics currently in US politics there is an increase in anti-trade rhetoric which has pushed Japan to develop a stronger relationship with the Community.

Cecilia Malmstrom the EU Commissioner of Trade was pleased with the recent developments regarding Japan. However, he also reiterated the importance to stimulate global trade which is has not been as weak since the financial crisis of 2009. Malmstrom stressed that a coordinated effort would be required to stimulate global trade.

Overall it can be seen that at the core of Brexit and the Community is access to the single market. The access that Britain will be able to have after Brexit will have a knock on effect on other nations and how they trade. Japan being the third largest economy in the world wishes to safeguard its interests and has approached the Community. It can be seen from this that at the heart of the Community is the single market, however, how it is accessed in the future by various nations is still to be determined.